Embraer looking at enhancing its supply chain base in India

On the same subject

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  August 14, 2020 | International, Land

  AM General CEO on acquisition by a private equity firm

  WASHINGTON ― KPS Capital Partners is acquiring Humvee-maker AM General, the private equity firm announced last month, marking a new chapter for the South Bend, Indiana-based vehicle maker. AM General President and CEO Andy Hove will continue to lead the company, and KPS Partner Jay Bernstein said the firm would continue to build on the ubiquitous Humvee, leveraging the company's “research, technology, innovation and new product development, as well as its heritage and iconic brand name.” The Humvee appears to have some growth ahead. For one, U.S. Army budget documents call for $1.5 billion through 2025 to pay for modernization of its fleet of High Mobility Multipurpose Wheeled Vehicles and their up-armored variant. That can include replacing major components, applying new technologies or replacing vehicles entirely. After the Army reaches its procurement objective for the Joint Light Tactical Vehicle, made by Oshkosh, it will have an enduring requirement for 54,800 Humvees. Otherwise, AM General ― which has advertised both its Brutus 155mm and Hawkeye 105mm mobile howitzers ― is expected to participate in the Army's mobile howitzer shoot-off evaluation at Yuma Proving Ground, Arizona, next year. Meanwhile, the Army is expected to complete a new tactical wheeled vehicle strategy in fiscal 2021, which has thus far received congressional support, per the House and Senate versions of the annual defense policy bill. Hove, who has said KPS will continue to execute AM General's existing strategy, spoke with Defense News on Aug. 6. This interview has been edited for brevity and clarity. Private equity firm KPS Capital Partners is in the process of acquiring AM General. At this preliminary stage, what would you say are KPS' plans and vision for the company? I think [KPS partner] Jay Bernstein represented it in his quote in the announcement that they feel really good about the capabilities of AM General and the strategy we've been executing. We've discussed with them where we can go. They're confident in our business and the growth prospects of AM General. They feel good about and stand behind our strategy, and we're going to work together with them. Will the company focus more on the Humvee, or do you see it becoming more flexible? What is the future for the Humvee? Who are its customers these days? To say we're only focused on the Humvee today would not be a correct premise. We've made investments across the board, in base automotive systems, and then automotive systems that have a particular special use. Our core focus is in solving very complex mobility challenges for customers. So the Humvee has a great future. I would offer that you turn to not what I say about what the Army will do but what the Army says they're going to do on the Humvee fleet, which is to steadily and systematically manage a very large fleet by systematic replacement of that fleet and recapitalization of that fleet going forward. They've been buying new-built Humvees to replace old Humvees over the last four years at a pretty heavy clip and have announced their intention to continue to do that going forward. We're obviously going to focus on the Humvee because there's significant demand. It is today the world's leading military 4x4 in its class, and we build more of them than any other military vehicle manufacturer in the world, and especially more than anybody in our weight class. That won't be the only thing we invest in. You can see our investments in the Hawkeye, which brings game-changing breakthrough technology [in relation to] how artillery systems are moved around and employed on the battlefield, together with a whole other range of implementing technologies such as autonomous navigation, off-board power and those kind of things. The U.S. Defense Department is an important customer, but a considerable portion of our businesses is global business, so we take a global view of how we solve mobility challenges for our customers around the globe. The Army recently issued a request for information about replacing heavy trucks. Is that a potential opportunity? We certainly feel like we have something to offer, a range of things to offer there, and that RFI's only been out for a couple of weeks. We'll will certainly take a closer look at that. We're also taking a look at the JLTV competition they announced back in February. Defense News recently characterized AM General as “largely stagnant” since losing the competition for the JLTV in 2015 to Oshkosh. Do you want to push back at all to talk about AM General's time under McAndrew & Forbes? The JLTV decision was 2015, and the four years since the announcement on the JLTV competition we've built more military vehicles than Oshkosh or any other military vehicle manufacturer by a long shot, and sold them to more customers around the globe than anyone else. I think that's far from being stagnant. There are a lot of adjectives you can apply to the company. “Stagnant” would not be the one I would apply. Private equity firms will typically set up companies they buy for faster growth, and then potentially that'll lead to a future sale. Do you think that's something that might happen here, and what do you predict? Is there any indication of time horizons for KPS? KPS has made a lot of smart investments, they have a pattern, but they're not going to be pigeonholed into a particular time frame for a next-step strategy. https://www.defensenews.com/interviews/2020/08/13/am-general-ceo-on-acquisition-by-a-private-equity-firm/

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  April 28, 2020 | International, Aerospace

  Collapse of Boeing-Embraer deal could have major impact on C-390 Millennium’s future

  By: Valerie Insinna WASHINGTON — Boeing's termination of a $4.2 billion deal for a majority stake in Embraer's commercial aviation business could have widespread implications on the Brazilian firm's flagship military aircraft. Boeing on Saturday announced that it would walk away from a joint venture that would give it an 80 percent stake in Embraer's commercial business, as well as a 49 percent stake in the company's C-390 Millennium cargo plane. Although Boeing said that the company would maintain previous teaming agreements to support Embraer with marketing the C-390 internationally, analysts told Defense News that the vitriol between the two companies could portend a wider collapse of their collaboration in the military sphere. “The future of the KC-390 without Boeing — or without a U.S. defense prime helping — isn't all that great,” said Richard Aboulafia, an aerospace analyst with the Teal Group. “It just seems like cooler heads should probably prevail.” At Dubai Air Show last November, the companies announced the formation of a new entity known as Boeing-Embraer Defense set up specifically to proactively market the C-390 around the world — a step up from previous agreements that had Boeing in more of a hands-off role. The agreement gave Boeing a new plane that could compete head-to-head against Lockheed Martin's C-130, and gave Embraer the resources to match. The big question now is whether Embraer seeks out partnerships elsewhere for either the KC-390 or its commercial business, said Byron Callan, an analyst with Capital Alpha Partners. “I just wonder, is there something else or someone else that emerges in 2021 or 2022 that ties up with Embraer. Could that be Chinese? Indian? Another country, company or entity outside of the United States?” he said. “That would be a more interesting broader change for aerospace, that has military implications as well, too.” It's even possible that Airbus could try to usurp Boeing's role as Embraer's partner on the C-390, said Callan, who noted that Airbus — like Boeing — does not offer a medium cargo transport aircraft that directly competes against the C-130. A good relationship gone bad On Monday morning, Embraer announced that it had filed arbitration proceedings against Boeing, capping off an angry back-and-forth between both companies that spanned the weekend. When Boeing announced it was walking away from the deal on Saturday, the company claimed it had “worked diligently over more than two years” to finalize the transaction, but that Embraer left some conditions of the master transaction agreement, or MTA, unresolved. "It is deeply disappointing,” said Marc Allen, Boeing's president of Embraer Partnership & Group Operations. “But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues." Embraer, however, issued a scathing statement of its own, asserting that it had fulfilled all contractual obligations and blaming the failure of the deal on Boeing's continued financial problems and the fallout from two fatal 737 MAX crashes. “Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the US$4.2 billion purchase price,” the company said. “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.” Boeing's decision to break its agreement with Embraer makes sense from a financial standpoint, Cai Von Rumohr, a defense analyst with Cowen, wrote in an email to investors. Because of COVID-19's impact on the aerospace industry, $4.2 billion seems an inflated price for Boeing to pay to acquire a controlling stake in Embraer's commercial business, and terminating the deal may help to free up cash that Boeing needs in the near-term. But while Von Rumohr said he believes Boeing and Embraer will continue to collaborate on the C-390, it will depend on whether the relationship can be salvaged. “This issue is, how pissed off is Embraer now, and is this something they're likely to get over to continue with what was a teaming agreement that made a whole lot of sense for both parties?” Von Rumohr told Defense News. Another major question is how the COVID-19 crisis effects worldwide defense spending, with implications for nations' domestic industries as well the international defense industrial base. Callan noted that some countries who have ordered the aircraft such as Brazil or Portugal “are probably looking at different defense budget projections. Aboulafia added that the dissolution of the partnership increases the likelihood that Embraer will need stimulus funds from the government of the Brazil to help fortify its commercial sector during the COVID-19 pandemic. “That money could easily come out of defense spending, which would impact Embraer defense programs, particularly Gripen or C-390,” he said. https://www.defensenews.com/air/2020/04/27/collapse-of-boeing-embraer-deal-could-have-major-impact-on-c-390-millenniums-future

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  December 4, 2020 | International, Aerospace, Naval, Land, C4ISR, Security

  U.S. Arms Sales Remain Robust Despite Pandemic

  12/4/2020 By Jon Harper Business is still booming on the foreign military sales front even though the world is reeling from the economic effects of the COVID-19 crisis. Boosting exports of U.S.-made defense equipment has been a top policy goal of the Trump administration. The government finished fiscal year 2020 with a total of $84 billion in potential FMS sales that had been approved. Roman Schweizer, an analyst with the Cowen Washington Research Group, called it a “massive” case load. “This isn't technically the ‘real' number but it's still impressive,” he said in a newsletter, noting that not all of the deals had been consummated. In 2019, $68 billion in potential FMS cases were announced, with $55 billion in actual sales reported, according to the research group. The 2020 numbers were better than many observers anticipated. “Some of the concerns that have been initially identified in April have not come to fruition,” R. Clarke Cooper, assistant secretary of state for political-military affairs, told reporters in October. In July, the U.S. government processed the second highest amount of FMS case work in the history of the State Department, he noted. “On large items that would take a long train or trail in contracting and production, have we seen a change there? No,” he said. “If anything, the work toward getting significant procurement for, let's say, F-16s or a Patriot missile battery, those things have not abated.” What explains this dynamic? Some nations have had better than expected economic recoveries, Cooper said. “There has been a recommitment by states who at one point understandably could have put on park or pause their modernization plans,” he said. “Overall, if we're looking at long-term modernization plans across the board ... we're currently remaining on a trajectory of where we were in FY '19 going into '21.” That doesn't mean nothing will change, he noted. There will probably be fluctuations on payments and payment schedules, he said. Some buyers could seek foreign military financing or grant assistance, or sequence their procurements differently. While trends seem positive, government officials don't have a crystal ball when it comes to FMS in 2021 and beyond, he noted. The new fiscal year began strong, with the Defense Security Cooperation Agency announcing in October that it had cleared more than $4 billion worth of missiles to Taiwan, as well as $27.2 billion worth of aircraft to Finland including F/A-18E/F Super Hornets, EA-18G Growlers and F-35 joint strike fighters. https://www.nationaldefensemagazine.org/articles/2020/12/4/us-arms-sales-remain-robust-despite-pandemic